GLOBAL MARKETS-U.S. stocks rise on credit thaw hopes, oil gains

* U.S., European stocks gain on signs money markets thaw

* S&P posts worst monthly loss since 1987, Dow since 1998

* Dollar is broadly firmer; risk aversion boosts yen

* Oil rises above $67 in late surge on short-covering

* Many financial markets mark record misery in October (Adds close of U.S. markets)

By Herbert Lash

NEW YORK, Oct 31 (Reuters) - U.S. stocks rose on Friday, closing out one of their worst months on record, on hopes that a thawing in credit markets will spur growth even as most commodity prices slumped again on growing evidence of a deepening recession.

Gold, oil and other commodities posted record declines during October, a month racked by wild price swings across all financial markets as investors sought shelter from a downturn that looms as the most severe since the Great Depression.

The U.S. dollar and yen posted sharp gains on Friday as investors reined in risky bets even after the Bank of Japan joined other central banks in cutting interest rates.

The euro EUR= fell more than 1 percent versus the dollar and yen, capping its worst monthly performance versus the dollar since the single European currency's inception in 1999.

Equities on both sides of the Atlantic shrugged off renewed signs of a deep slowdown. U.S. consumers in September cut spending for the first time in two years and their mood soured further in October as they braced for tough times ahead.

The interbank cost of borrowing dollars, sterling and euros again eased in overnight markets, lending support to equities, while stock buying by mutual funds to rebalance portfolios at the end of their fiscal year also helped, traders said.

The interbank cost of borrowing dollars fell across the board, with the overnight dollar rate falling to 0.40 percent from 0.73 percent, well below the U.S. Federal Reserve's benchmark federal funds rate of 1 percent.

Financial shares, led by a more than 8 percent gain in JPMorgan Chase (JPM.N), lifted Wall Street as the interbank borrowing cost eased.

"One of the big stories this week is October ended, and specifically the fiscal year for institutional mutual funds and pension funds came to an end," said Bruce Zaro, chief technical strategist at Delta Global Advisors in Boston.

"I think that relieved a lot of the selling pressure and you've seen some window dressing," Zaro said.